“Big BioPharma” Converts

The prospects, practice and perception of biotech therapies has dramatically evolved in the past decade.   Presently, the biggest Pharma’s all have major biotech divisions, or altered their core business model towards biotech (vs. the synthetic chemistry approach.)   But only seven to eight years ago, there was little talk of regulatory “biosimilars”. Indeed the FDA had repeatedly opined that “generics for biotech” could not follow the path that was acceptable for synthetics.  And yet powerful forces were coming into play.

In 2004, I was helping a major biotech firm rethink and re-engineer some of their R&D processes.   One justification of becoming more nimble and efficient, was that “Big Pharma” (typified with small molecule, synthetic approaches), had huge war chests of monies, and would be gunning for their domain in the coming years.   These visuals of the sales curve of synthetics vs. biologics helps to make this point.

Again, the value of the product overall is reflected in the area under the sales curve.  Dark green area to left reflects the impact of acceleration, as noted previously.  (This is an idealized curve; more detail can be found here.)   Note that for drugs subject to generic entry, the drop-off is substantial.

The right hand graph reflects average sales of biotech drugs launched up to 2004. Even if the cost, risk or time of developing biotech drugs are larger than synthetics, it is clear that the value returned is far larger vs. small molecules.  This no doubt drove some of the ensuing industry evolution.

Ironically the general attitude and comments from the biotech professionals in 2004 was that they were “uniquely” skilled in strengths, knowledge and skills.  They felt that these could not be duplicated by the “synthetic dinosaurs”.   New sales curves and ROI models are now being developed as economic and social pressures have moved biosimilars forward.

Comments?   How are you modeling biosimilar risks?   Has your firm changed its gameplan because of the above?



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